Biotech Remains Upbeat During the Summer

Traditionally, the summer months tend to be quiet for the biotech sector. However, the general markets experienced three solid months of gains as investors started to believe that the worst of the economic woes were over. This upbeat mood spilled over to biotech with the Burrill Biotech Select Index posting a solid gain of almost 11% from the June to August period, staying pace with the Dow, up 11.7% and NASDAQ, up 13.23% during the same period.

Adding to the favorable capital markets, biotech impressed investors with positive drug data, strong drug sales and earnings, and partnering and M&A deals. Shares of Human Genome Sciences, for example, jumped a whopping 690% after the company announced that its drug candidate Benlysta reduced lupus symptoms. Some of the share price increase was also driven on rumors that GlaxoSmithKline (GSK) could acquire Human Genome Sciences because GSK has collaborated on Benlysta development.

Investors also rewarded Savient Pharmaceuticals whose shares soared 119% after the FDA said its drug Krystexxa appeared to successfully relieve swollen joints and pain flare ups associated with gout. Other major biotech movers in the June to August period included:

Targacept, which closed up a whopping 424% mainly on news that its drug candidate, TC-5214, significantly improved symptoms of major depressive disorder for patients who did not respond to an older drug, Forest Laboratories Inc.'s Celexa.

Orexigen Therapeutics' shares jumped 122% after revealing that Contrave, a longer lasting form of two generic diet drug compounds, helped people lose weight in all three of its major clinical trials. That should clear the way for the company to file for approval to market the drug with the FDA.

Medarex's shares soared 90% in July on news that Bristol-Myers Squibb (BMS) was buying the company for $2.4 billion, or $16 per share in cash, representing a 90% premium. With the acquisition, BMS gains full rights to ipilimumab, an experimental drug for metastatic melanoma in late-stage testing. BMS also gains rights to seven antibodies in clinical trials under Medarex's sole sponsorship and three other antibodies being co-developed with other partners, and rights to preclinical assets in various stages of development by Medarex.

In addition, we did see an IPO get out the door in August. Cumberland Pharmaceuticals raised $85 million by offering 5,000,000 shares at $17, below the expected range of $19 to $21. The specialty pharmaceuticals company has products on the market, including a new injectable treatment for pain and fever.

The Cumberland IPO will not open the biotech IPO window just yet, but companies on the runway with products already on the market, or close to it, might be tempted to test the waters. Early-stage biotechs, however, are unlikely to find favor in a climate that still has no tolerance for risk.

An international IPO was also completed during August. Israeli biotech company, D-Pharm, listed on the Tel Aviv Stock Exchange, raised $7.6 million in an oversubscribed offering. The offering price of approximately $4.50 per share was higher than D-Pharm's original minimum goal, but still considered a bargain considering the company's pre-IPO valuation of about $32 million. D-Pharm also raised $15.4 million in a rights offering at the same time and at the same terms. The company will use most of the proceeds to fund a late-stage clinical trial of its lead drug DP-b99 in moderate to severe ischemic stroke for which the only currently approved drug is tissue-plasminogen activator (t-PA), marketed by Genentech as Activase.